‘For every ₹1 we give, Karnataka gets only ₹0.15 back': Siddaramaiah seeks ₹1.15 lakh crore for Bengaluru

Hindustan Times

12 hours ago

Karnataka Chief Minister Siddaramaiah on Friday made a strong pitch before the 16th Finance Commission for a more equitable share of central taxes for the state and sought a ₹1.15 lakh crore investment over five years to bolster Bengaluru's infrastructure.
In a detailed meeting with Commission Chairman Arvind Panagariya, the chief minister flagged the fiscal disparity Karnataka faces, stating that despite contributing nearly 8.7% to India's GDP with only 5% of the population, the state receives disproportionately low returns from the Centre.
Also Read - Bengaluru climbs to 14th spot in Global Startup Ecosystem Rankings 2025
'For every rupee Karnataka contributes to union taxes, we receive just 15 paise in return,' Siddaramaiah said, calling the imbalance stark and deeply unjust. He added that the discussion with Panagariya was cordial, and the Commission appeared open to the state's demands.
The chief minister also drew attention to the state's reduced share in central funds under the 15th Finance Commission. Karnataka's share in tax devolution dropped from 4.71% to 3.64%, leading to an estimated loss of over ₹80,000 crore during the award period. Moreover, Karnataka's per capita devolution fell from 95% to just 73% of the national average between the 14th and 15th Finance Commissions.
In its formal submission, the state government called for a significant overhaul in the devolution formula. Karnataka urged the Commission to raise states' share of divisible taxes to at least 50%, cap cess and surcharges at 5%, and include the Centre's non-tax revenues in the divisible pool.
Siddaramaiah stressed that states are currently excluded from revenue earned through central cess and surcharges. 'If cess and surcharges exceed 5%, they should be brought into the divisible pool so that states can benefit,' he said.
Also Read - Bengaluru woman witnesses rare 'peaceful accident': 'No fights, just handshakes'
To ensure a fairer distribution among states, Karnataka proposed a model in which each state retains about 60% of its contribution to central taxes, while the remaining 40% supports less-developed regions — striking a balance between equity and incentivising performance.
The chief minister also criticised the current design of revenue deficit and state-specific grants. He cited Kerala's receipt of a ₹38,000 crore revenue deficit grant, while Karnataka received nothing under that head. He also questioned the denial of a ₹5,495 crore special grant recommended for Karnataka by the 15th Finance Commission but ultimately not sanctioned by the Union government.
To correct these imbalances, the state has suggested recalibrating the weight of the income-distance criterion — currently favouring poorer states — by reducing it by 20%, and reallocating that weight to reflect each state's contribution to the national GDP. This, Siddaramaiah argued, would ensure that economically productive states like Karnataka are rewarded rather than penalised.
He concluded by urging the Finance Commission to consider reforms that would make the devolution system more predictable, performance-based, and transparent — with a focus on both promoting national growth and addressing regional disparities.